Falling Wedge Pattern: Squeeze, Breakout, Target

What it shows

Both wedge lines, drawn from the first swing to the breakout candle with a light fill between them. A label sits over the middle of the wedge at its highest swing, and a dotted line leads to a Target label.

How Pravex works it out

1. Swings are read from the last 600 candles and no further back. To count as a swing high, a candle needs a high above each of the 5 before it and not below any of the 5 after it (lows are mirrored). So the newest swing is always at least 5 candles behind the live candle. When the same kind of swing turns up twice running, the more extreme one replaces the other.
2. A wedge uses four swings in a row, two highs and two lows. The upper line joins the first and last high, the lower line joins the first and last low.
3. Both lines must slope down, with the upper line falling quicker so that they converge. The channel at the end must be at least the Minimum squeeze share narrower than at the start. No close may go beyond a line by more than 2% of the end width.
4. Any later close above the upper line is the breakout. Unlike the triangle there is no apex limit, so a breakout many candles later still counts. Target: the upper line at that candle plus the starting width. Failure level: the lower of the lower line at the last swing and the lowest swing; a low under it before the break drops the shape.
5. Once a candle has broken out, the target and the failure level race each other. Whichever a later candle touches first sets the status, Reached or Failed; a candle touching both gives Indefinable; with neither touched it stays Awaiting.

Settings

Setting	Default	What changing it does
Which patterns to keep	All	Limits the chart to patterns with a given status: all of them, only Awaiting and Reached, only Awaiting, or just the newest Awaiting one (Last Awaiting). The last choice shows only the setup that is still open.
Where targets are drawn	Only Awaiting	Which targets to draw: All, Only Awaiting, Awaiting and Reached, or None. Hover a target to read its price, the pattern’s name and its status.
Minimum squeeze	30	How much the channel must have narrowed, in percent of its starting width. At 30 the end is at least 30% narrower than the start. Raise it for tighter squeezes, lower it to accept looser wedges.
Show unconfirmed patterns	off	Leave it off to see completed breakouts only. Turn it on and unfinished shapes appear as well: the last leg is dotted, its end is the running extreme rather than a confirmed swing, and the target is where a breakout would aim.

How traders read it

A falling wedge is a decline running out of room: the swings keep narrowing as it falls. A close over the upper line is the trigger, and Pravex sets the target one starting width beyond it.

Just to show the sum (all prices invented), the channel is 12 wide at the start and the upper line is at 95 when a candle closes over it. Add 12 to 95 and the target comes out at 107.

When it misleads

A falling wedge is also a plain downtrend with slowing legs, and the downtrend can simply continue; the shape is drawn only after the close above (unless unconfirmed patterns are shown). Because there is no apex limit, a break long after the shape formed is still drawn. The swings used are confirmed ones, which means a delay but not a guarantee. A more extreme swing of the same kind later on replaces the earlier swing and can move or erase the pattern, and a close through the line on the still-open candle may be undone before it closes.

Questions and answers

What makes it a falling wedge and not a triangle?

Both lines slope down and converge. A triangle needs a flat or falling upper line and a flat or rising lower line.

Where is the falling wedge target?

The wedge’s starting width, added to the upper line’s price at the breakout candle.

Is there a time limit on a falling wedge breakout?

No. A triangle must break before its lines meet, but a wedge counts a close above the upper line at any later candle in the 600-candle window.

What does Minimum squeeze do?

It sets how much the wedge must narrow. At 30 the channel must end at least 30% narrower than it started; a higher number keeps only tight wedges.

Related: Rising Wedge Chart Pattern, Triangle Chart Pattern, Bullish Flag Chart Pattern, All Chart Patterns, every indicator.